Over the past few years, there has been no shortage of legal cases brought by federal and state prosecutors against drug and device manufacturers for promoting their products “off-label.” These cases have led to hundreds of millions of dollars being collected by the federal government, and in a few recent cases, even billions of dollars.
One recent case, however, had quite the opposite result. Specifically, federal prosecutors last month walked into federal court with 13 felony charges against Stryker Biotech Corporation and six against its former national sales director and two former regional managers. As an article from Rx Compliance Report recently described, the Department of Justice (DOJ) alleged an illegal off-label promotion scheme designed to enrich both the company and the individual defendants.
Despite the significant stakes the company faced—mandatory exclusion from doing business with federal health care programs—Stryker’s defense team managed to turn the thirteen felony charges into a settlement for a single misdemeanor plea and a fine of $15 million from Stryker Biotech, a fraction of the total sales at issue. As Rx Compliance Report noted, “the prosecution of Stryker Biotech represents the first bona fide off-label case against a pharmaceutical or medical device company to go to trial since the government’s enforcement initiative in those two sectors started in earnest roughly a decade ago.”
Background of Off-Label Cases
In general, the Food and Drug Administration (FDA) approves drugs and devices only for specific indications. For example, a drug may only be approved to treat patients for cancer. This indication is then approved and placed “on the label” of the drug and in its packaging. FDA, however, does not regulate what indications a physician or other legally authorized healthcare professional can prescribe the product for. Therefore, if a drug has been shown through clinical research to have other indications, that are “off-label,” and therefore not approved by FDA, a physician—based on his training, experience, education, and individual patient’s history and presentation—can prescribe a drug for that off-label indication.
Drug and device manufacturers, however, cannot promote these off-label uses. Doing so violates the Food, Drug, and Cosmetic Act (FDCA), and renders a product mislabeled or misbranded. If a manufacturer submits claims for off-label uses of a drug or device, and Medicare or federal health programs pay for such off-label use, state and government prosecutors can go after companies not only for violating the FDCA, but also violating the False Claims Act (FCA) for causing false claims to be submitted to federal healthcare programs.
DOJ has made violations of the FDCA a top priority for close to a decade and more recently, DOJ has repeatedly stated its intent to prosecute individuals along with companies. The case against Stryker Biotech was brought by the Healthcare Fraud Unit in the U.S. Attorney’s Office in Boston, which has played a central role in prosecuting drug and device companies over the past decade. This includes many of the largest corporate off-label cases, such as Pfizer’s $2.3 billion off-label settlement in 2009.
More recently, it included the high-profile prosecution of former GSK attorney, Lauren Stevens. That case came to an abrupt conclusion when the judge threw the case out of court at the conclusion of the government’s evidence.
The Case
“The core of the government’s allegations centered on alleged off-label promotion and the concealment of adverse events,” says WilmerHale’s Brent Gurney, who represented David Ard, one of the regional managers. “The government tried to turn it into a fraud case,” he says, “but that square would not fit in that circle.” “The mistake they made in this case was not bad tactics,” says Gurney. “It was a case that never should have been brought.”
The government alleged that Stryker Biotech had deliberately misled surgeons and put patients at risk by marketing an unapproved mixture of two separate products – OP-1 and Calstrux – used to generate human bone growth. Assistant U.S. Attorney Susan Winkler told the jury in her opening statement that the mixture was never studied clinically; the company did not know whether it worked or was safe; and yet they still marketed it to doctors.
Winkler promised to provide evidence that the defendants knew that promoting the mixture of OP-1 and Calstrux to doctors was illegal because it was not approved by FDA. She said she would also show evidence that the three defendants and the corporation “knew that doctors had been misled into thinking this product was all OP-1, that they didn’t even realize in many cases that Calstrux was involved, and that they would convince doctors to buy it on that basis.” The evidence would also show that the defendants sought to put hundreds of thousands of dollars in their pockets through the scheme, she said.
Stryker’s defense counsel, however, struck a sharp blow to the government’s case. While the government specifically identified seven surgeons in its indictment who, it charged, had been deliberately misled by Stryker Biotech’s sales team, Ropes & Gray’s Brien O’Connor revealed during his opening argument that federal prosecutors had failed to speak with any of the surgeons and “never interviewed even one of these supposed victim surgeons. They never spoke with them. They never even tried to speak with them. They took two years before this indictment to investigate. They could have taken longer. There was no deadline to meet.”
Instead, O’Connor told the jury, defense counsel did speak with the surgeons. And as O’Connor told the jury further, these surgeons were going to take that witness stand and tell the jury “three things: The defendants did not lie to them; the defendants did not deceive them; the defendants did not defraud them in any way.”
The next blow to the government came when the government’s first witness testified that doctors mixed the two products in question, because that is consistent with medical practice, not because they had been influenced by Stryker Biotech sales reps.
Shortly thereafter, the government agreed to dismiss all charges against the individuals and settle the case against the company with a single misdemeanor count of misbranding a medical device. A week later, DOJ dropped all charges against the remaining defendant, Mark Philip, who was president of the company from 2004 to 2008.
One seeming advantage the government had was the fact that four Stryker sales reps had earlier pled guilty to felony misbranding charges in connection with the two products. The problem for the government, says Levy, was the fact that the company itself had fired those individuals for forging documents. Because of the humanitarian exempt status of the products, institutional review boards (IRB) had to sign off on the use of these products, he explains. The sales reps who later pled guilty had forged signatures associated with that process.
Ironically, the company not only turned them in, says Levy, it also made four written voluntary reports about the incident to the FDA. Prosecutors subsequently requested the company’s internal statements, he says, and then used them to start building a criminal case against Stryker Biotech. “They pled guilty to felony misbranding with intent to deceive,” he says, “but they cut a deal with the government and were set to testify pursuant to personal cooperation agreements with the government at trial.”
Post-Case Developments
Shortly after the charges against Philip were dropped, U.S. Attorney Carmen Ortiz issued a statement regarding the outcome of the case. While she cited the “unparalleled” success the U.S. Attorney’s Office in Boston has achieved in combating fraud, she noted that “unfavorable pretrial rulings, combined with a strategic error in preparing for trial, led to the dismissal of charges against the individual defendants in the Stryker case.” Ortiz called it “a difficult decision” that was warranted by a “complex confluence of factors.”
Although the company will pay a $15 million fine in connection with the misbranding misdemeanor. Ortiz noted that, “doing justice meant dismissing the charges, rather than subjecting these individuals to a protracted trial where the government could not put its most effective case before the jury.”
According to the defense team, the government faced several significant problems from the outset. First, they noted how surgeons are highly-skilled individuals who make their own decisions about how they use medical devices in complex spine and trauma surgeries. “The government claims they were victimized … but never spoke to them.”
Second, the defense team showed that the products were in fact safe by showing that the number of adverse events totaled 63 out of 10,000 uses – or less than one percent. Moreover, many of the adverse events were relatively minor conditions, such as fevers or infections that were quickly remedied. “I think we effectively defused the notion that the products were not safe,” says Joshua Levy, a partner with Ropes & Gray, which represented Stryker Biotech.
Another problem with the government’s case was its characterization of the relationship between Stryker Biotech’s sales force and the physicians who would potentially use the products in question. Gurney says that relationship is paramount for the company’s long-term success. “The company is interested in a long-term relationship with surgeons,” he explains. “This isn’t a quick hit business.” In short, he says, the notion that the company would deliberately attempt to trick sophisticated physicians into using a product by concealing important facts is “absurd.”
In addition, says Gurney, there are many bone void fillers on the market. “It is almost a commodity,” he says, “so the idea that a surgeon would be confused about the two products or how they should be used is also absurd.”
Finally, Levy points out that the products in question were approved under a humanitarian device exemption that precluded the company from making a profit. While the restriction was not necessarily a hard cap, he says, this further undermined the notion that the company was primarily interested in maximizing short-term sales.
Conclusion
Ultimately, the defense counsel credited DOJ with “doing the right thing” and dismissing the case. Health care attorneys praised the defense counsel on this case and noted how they “out-investigated” the government and did an “exceptional job researching the elements of the government’s fraud theory and then investigating the facts and evidence.
This case serves as an example for future off-label promotion cases that the government tries to turn into fraud cases. The problem, as pointed out by defense counsel, was that these kinds of cases never get tested because companies don’t want to risk exclusion. However, here, a “case got tested” and the government realized that off-label promotion is not just “black and white.”
Given the risks companies face—mandatory exclusion from doing business with federal health care programs for a felony conviction—it is still uncertain whether this precedent will lead other companies to take their cases to court. If anything, this case just demonstrates that the government, next time, is going to be bringing everything they have to win one of these cases.